The Global Capital Market Reconsidered

Maurice Obstfeld

No 16375, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: While the globalization of production has been a prominent target of anti-globalization backlash, globalized finance has seemed to be much less in the public bull’s-eye. The blueprint for the postwar international economy agreed at Bretton Woods in 1944 envisioned nothing like today’s extensive and fluid global capital market. The demise of the 1946-1973 fixed exchange rate system, however, also brought a progressive dismantling of barriers to international financial flows motivated by special-interest politics, national economic competition, and ideology – alongside the benign desire for a more efficient international allocation of capital. Unfortunately, free cross-border financial capital mobility can compromise governments’ capacities to attain domestic economic and social goals in several ways. This essay links the dynamics of financial liberalization to the Teflon-like resilience of finance to backlash so far, and suggests that stronger backlash could emerge if national governments fail to enhance multilateral cooperation to manage the financial commons.

Keywords: Global capital market; Embedded liberalism; Financial stability; Globalization; Multilateralism (search for similar items in EconPapers)
JEL-codes: E52 F02 F21 F30 F65 O19 (search for similar items in EconPapers)
Date: 2021-07
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